Good day, ladies and gentlemen, and welcome to the ArQule Incorporated fiscal year 2008 investor conference call. My name is Dan and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to host for today's call Mr. Bill Boni. Please proceed sir.

Bill Boni

Good morning, everyone. Welcome to the ArQule investor conference call reviewing operation on financial results for fiscal year 2008. This is Bill Boni, Vice President of Investor Relations at ArQule.

This morning, we issued a press release that reported results for the fiscal quarter and year ended December 31st, 2008, as well as a press release announcing the expansion of our Phase II program with ARQ 197. These releases are both available on our Web site at www.arqule.com.

Leading the call today will be Paolo Pucci, Chief Executive Officer of ArQule. Also present for the company are Peter Lawrence, President and Chief Operating Officer, Dr. Brian Schwartz, Chief Medical Officer, Dr. Thomas Chan, Chief Scientific Officer, and Rob Weiskopf, Vice President of Finance.

Before we begin, please note that we will be making forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results may differ materially from those projected in the forward-looking statements due to numerous risks and uncertainties that exist in ArQule's operations, development efforts, and the business environment.

Including those factors discussed in our press release, announcing this call and posted on our website, as well as in our reports on forms 10Q and 10K and subsequent documents filed with the Securities and Exchange Commission. These forward-looking statements in this call represent the judgment of ArQule as of today.

ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law. We will provide an opportunity for questions and answers at the end of the call. I would now like to introduce the CEO of ArQule, Paolo Pucci.

Paolo Pucci

Thank you, Bill. Good morning all on the call, and thank you for joining us today. I will begin by saying that we have been very busy over the past few months, taking a number of steps that were aimed at strengthening the company operations. And I'm glad to report that we have largely succeeded in laying the foundation for a strong business for ArQule for the future.

First, we have strengthened significantly our financial structure. We have a strong balance sheet and this balance sheet will allow us to go past the key inflection points that are ahead of us over the next three years relative to our key programs.

First and foremost, the ARQ 197 program, but also some of the others that we will discuss briefly today. Number two, we have refined and expanded the clinical development line for our lead project, which is ARQ 197.

We also have a plan to advance cost effectively some of the other projects that we consider interesting in our pipeline. Finally, we have taken the first step in applying our innovative discovery platform to the identification of novel compound, and that first step is something we have discussed in our Q3 call and it relates to the discovery agreement that we have signed with Daiichi Sankyo.

Now, we have heard repeatedly from our investors that the financial strength of the company is a fundamental prerequisite to go and meet our clinical goals and to go past the clinical milestones that we have in front of us over the next three years.

And we have been able to achieve financial strength and strong balance sheets in a non-dilutive manner. And I think this makes us a fairly unique company these days. The markets continue difficult and turbulent, and not many companies have been able to achieve greater financial strength through non-diluted financing.

We believe that this financial strength we have now, allow us – will allow us to manage our business for the next three years, and it positions us well for the future. Now, it is important for me to recount briefly the two agreements we have for our business development with 197. And then, I will go into the financial guidance and then into the operational guidance.

Let me summarize the nature of those two agreements with Daiichi Sankyo. The first one is a cooperation – a cooperation [ph], which is Co-Development and Co-Commercialization of ARQ 197 in Europe, U.S., South America and the rest of the world, and this goes to augment the previous agreement we had with Kyowa Hakko Kirin for the region Asia-Pacific, Japan.

The second agreement that we have with Daiichi Sankyo is a discovery collaboration that applied our discovery engine to the study of two specific targets, which remain undisclosed. Together, these two agreements have added $75 million to our cash resources, and they provide us in addition to that, for significant opportunities for cost sharing, as well as the support of our discovery engine.

All of these elements enhance our financial strength today. A word about the preexisting agreement we had with Kyowa Hakko Kirin. That agreement has proceeded well during 2008, and it has generated a $3 million milestone related to the initiation by Kyowa Hakko Kirin, of our Phase I trial for ARQ 197 in Japan.

As reported in our Q3 call of last year, the two agreements combined includes total – the three agreements combined include total up front payments of $90 million, and will provide for total up front and potential milestone payments or in excess of $750 million.

Let me now move to the financial guidance. I will reconcile for you three fundamental items. One is cash at end of '08. Number two is our expected net use of cash for the current year 2009, and number three is our expected cash balance at the end of 2009.

We have talked about the impact of these deals and you will now see the impact of this deal reverberate to the three financial items I will cover. I should again state that the financial position that we have, and the way it will develop should allow us to fund operations well into 2012.

So let me start with our total net cash and marketable security balance at the end of 2008, December 31st, 2008. We ended with approximately a $158 million. This reflects an increase of approximately 8 million above the top end of the range that we had guided you to in our Q3 call of last year. I shall remind you that our last guidance was to end 2008 between a $145 and $150 million.

The better than expected end of '08 number for net cash is related to three items, an advanced payment from Daiichi Sankyo that we receive at the end of the year, and that relates to their funding of our AKIP discovery collaboration. Then an increase in the valuation of certain of our offshore securities, and finally, but no less importantly, certain cost containment measures that we have put in place independently.

Let me now move to our guidance relative to our use of cash in 2009, which is expected to range between $46 and $49 million. To project how the net use of cash will develop over a quarterly basis during the year of 2009, it is advisable [ph] for me to spend just a few words to clarify system cost reimbursement provisions which are included in our Daiichi Sankyo agreement.

In extreme summary, reimbursement of expenses incurred for the clinical development of ARQ 197 will be received by ArQule, approximately one-quarter after those expenses have been incurred. This will help you better understand the dynamics of the evolution of our net cash over the next year on a quarter-by-quarter basis. Total expense, we thought we would mention it already now.

Let me reconcile the third item relative to our cash position. Our total net cash and marketable securities at the end of this year, December 31st, 2009, therefore is expected to range between $109 and $113 million. We expect therefore to end this 2010 so next year in a position of relative financial strength.

I should also note that during 2010, we will approach key data related inflection point for our lead program ArQule 197, which is well into the Phase II stage of the development program as we speak. I shall further note that as the ArQule 197 clinical program proceeds into Phase III, ArQule cost contributions to that program from that point on will be funded under the Daiichi Sankyo agreement we have exclusively other milestones and royalties that will be received by ArQule from Daiichi Sankyo.

I will characterize this guidance that we are giving as a conservative guidance. We have not, because in this guidance that we are providing for 2009, we have not included neither milestone payments that might be associated with the development – with developments related to the existing business development deal we have with Daiichi Sankyo and Kyowa Hakko Kirin nor we have included any non diluted cash inflows that could come from additional partnering activities we will do related to programs that are ongoing or our discovery engine. Any such cash inflows if realized will be incremental to the guidance that we are providing today.

So the guidance might have some upside and we shall see during the year if those upsides might be realized, but as is the guidance per say, we believe the strong guidance that gives you confidence in the long-term viability of this company, and in its ability to remain well-financed into the key inflection points relative to lead development program, ARQ 197.

There's one last item that I need to reconcile relative to our financials, and it is our position relative to the auction rate securities. In this guidance, in fact we want to remind you all that in the call of November, we discussed our acceptance of an offer by UBS to participate in rights offerings related to UBS obligations under a settlement agreement with SEC and other regulatory authorities.

As a result, ArQule can require UBS to repurchase at par value those securities, beginning June 30, 2010. We believe that this represents a significant step forward to resolving the illiquidity of our auction rate securities. This is as much as I have to say relative for our financial guidance.

Let me now move to our operational guidance. This is how another way we're planning to add value for our shareholders – through our discovery and development efforts. For 2009, our primary focus will be on our lead product, ARQ 197. We will pursue the clinical development of ARQ 197 in several ways.

We plan to complete patient enrolment in the Phase II monotherapy trial in MiT tumors and prepare to move into Phase III, if Phase II endpoints are met.

We plan to substantially complete patient enrollment in our randomized Phase II combination therapy trial, for non-small cell lung cancer and that is in combination with erlotinib. We plan to initiate patient enrollment in the pharmacokinetic combination trial with gemcitabine, and this will be part of our modified pancreatic cancer program.

We plan to complete enrollment in the Phase I trial hepatocellular carcinoma, which is our new import indication declare as of today. Impending the results of that trial, we plan to initiate a Phase II trial in monotherapy and, or in combination therapy with sorafenib. Logically we have one additional objective for 197, which is to initiate patient enrollment in the pharmacokinetic combination trial with sorafenib.

We're really working very closely with Daiichi Sankyo and Kyowa Hakko Kirin to refine a global development plan for ARQ 197, which includes these trials that I just mentioned, but also allows for consideration for additional trials that might be useful to the program.

So in summary, we are expanding during 2009, the ARQ 197 program from three preexisting two more programs, which were MIT, non-small cell lung cancer and pancreatic cancer to forward two more programs and we're doing so by adding the indication of hepatocellular carcinoma. The trial has been initiated and the press release has gone out this morning. We're looking forward to discuss this with you in the Q&A.

In addition, we are also expanding the ARQ 197 combination program from two combinations, Tarceva erlotinib plus 197, gemcitabine plus 197 to three combination programs, by adding the combination 197 plus Nexavar sorafenib.

We will present relative to this new planned combination of ARQ 197 plus Nexavar, we represented up ARQs at the upcoming AACR meeting. The data we have accumulated relative to this combination, which has convinced us of its worthiness to be incorporated in our program.

Let me now turn to the rest of our portfolio. I'm pleased to report that ArQule offers multiple value generating opportunities. We are in fact in the position to generate proof-of-principle clinical data for several additional products.

We intend to do so in a cost effective manners. In the past eight months, the environment, the general environment we all work in, has not improved, and that forces a great degree of discipline upon all of us.

We're not immune from that even though we are in a very strong financial position relative to most of our peers. So let me tell you about the one program that will go into Phase I. It is the candidate called ARQ 621. It comes from our Eg5 kinesin spindle protein program and we have filed an IND for ARQ 621 in December last year and that has been announced accordingly.

We believe that Eg5 is an attractive mitotic target for cancer therapy. And we believe, based on the data that we have accumulated so far, that our compound has the potential to avoid the bone marrow toxicity, which has been indeed observed in the first generation of such kind of products.

We plan to initiate a Phase I trial with this compound in the first half of this year and we plan to complete such trial by the end of this year. We have also, as you recall filed an IND at the end of last year for ARQ 761 which was the lead compound emerging out of our E2F1 activator program. That compound has come about through a very good and lasting partnership with Roche you also know that that partnership was dissolved at the end of last year. We are right now in the process of assessing how to best and most cost effectively bring forward this candidate.

Future plans will be discussed in future calls. Let me finally turn to one more program that we are not providing many details for now, but it is active. We have a discovery program that should be substantially completed by the end of this year and should deliver an IND in the earlier part of next year, I assume that a novel IND in the early part of next year. This covers the pipeline.

Let me now offer a few words relative to our discovery engine, which has emerged and has captured much attention since the announcement of the discovery Daiichi – deal we have with Daiichi Sankyo. We consider our discovery engine one of the most exciting assets that has emerged here at ArQule over the past 12 months.

Based on the novel binding mode of ARQ 197 to its target, the c-Met receptor tyrosine kinase. We have identified similar binding sites for more than a 100 kinases and we believe that we have within our ArQule discovery platform the capability to design normal kinase inhibitors, including ones that do not compete with ATP, and that's my lead through that selectivity to fewer – to products that eventually demonstrate fewer of target side effects and a better overall side effect so far.

The Daiichi Sankyo deal that was announced in November is our first collaboration utilizing the full power of the AKIP platform. It is focused on discovering therapeutic compounds directed to two kinase targets in the field of oncology, but we believe that we can apply this platform to kinases that have implicated in a broad range of human diseases in addition to cancer. We will seek to expand the application of this proprietary platform either through additional collaborative efforts or independently.

Let me come to closure of this call and so that we can open for Q&A.

The ArQule platform and the ArQule pipeline are clearly expanding; however, we are very aware that this is a very difficult financial environment. And we are very aware that we have to exercise the greatest discipline to prioritize in a timely fashion our project and then we have to do so on a continual basis.

We will therefore continually assess the development of the safety and efficacy profiles of each of our product candidates. We will continuously reassess our assumed clinical and regulatory pathways for such programs and we will keep a very keen eye on the competitive landscape as well very close to my heart, we will continuously check the commercial prospect of each one of the strongest ones that might hit the market.

So let me finalize the call by reiterating our guidance. Our guidance for this year is as follows. For year 2009, ArQule expect net use of cash in the range of 46 to $49 million. We expect revenues in the range of $21 million to $24 million. We expect a net loss to range between $44 million and $47 million. And we expect net loss per share to range between 0.98 and 1.05 for the whole year.

We expect to end year 2009 with net cash and marketable securities in a range of between $109 million and $112 million that is net of the $47.8 million loan that was obtained and drawn down from UBS and which is collateralized by our auction rate securities with UBS.

This guidance again, does not include any potential milestones that might be associated with existing deals or potential cash inflows from additional partnering. Any such cash inflows will be incremental to the guidance we are providing to you today.

Our progress during the past year would not have been possible without the contribution of talented people here at ArQule. And I would like to thank all of my colleagues for their hard work, particularly in this difficult time.

With that, I will close this part of the call, and I'd like to remind you that joining me is the ArQule management team and we're looking-forward to your questions. Thank you.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Mark Monane from Needham & Company. Please proceed.

Mark Monane – Needham & Company

Thank you, good morning, and thank you for the comprehensive review.

Brian Schwartz

Good morning.

Mark Monane – Needham & Company

Glenn [ph] is on the line as well and has a question. Mine has to do with the sarcoma trial. Can you help us understand a little bit about the a priori [ph] outcomes that you have in terms of how to evaluate the data before it comes out? And then, help us think about how progressions-free survival response rate might inform a survival trial going forward?

Brian Schwartz

Mark, this is Brian Schwartz here. In terms of the current trial, the way that it's set up, we will be evaluating closely both response rate as well as the progression-free survival in the three subgroups we're evaluating in the MiT trial. Based on that information, we have met with a bunch of experts who've advised us what criteria we must probably need to see in the Phase III trial. And as you mentioned correctly, this will incorporate both a response rate driven endpoint and potentially a progression-free survival endpoint as well.

As you are aware, a number of trial designs may offer you the opportunity to get both, such as the randomized discontinuation design and other ideas that we would have to vet [ph] with the appropriate authorities before deciding on a final trial design for our Phase III program. So just in a nutshell, we currently evaluating the data, as we complete the trial, will be going to the appropriate authorities to vet the design and the exact end points we'll have to achieve.

I think the last point to mention is that the two sarcomas that we're looking at are relatively rare. So that the number of patients available would have to be accounted for in the trial design itself in order to get the Phase III data in a reasonable timeframe. So taking all of those things together, we'll vet this and make sure that the Phase III design is acceptable for approval.

Mark Monane – Needham & Company

That was fair. And Glenn has a question as well.

Glenn – Needham & Company

Yes. Congratulations on initiation of the Phase I trial in HCC. I had a question on – a couple questions, one on patient selection cirrhotic is – there is something special about that population? And second, for the end of the phase I trial how does the company feels that ARQ 197 will sort of perform in the spectrum of multi-targeted kinases like (inaudible) or sorafenib being that it's not a promiscuous ATP kinase.

Paolo Pucci

Glenn, just in response to the HCC program of the discussions with experts and there is guidelines in terms of development of HCC, the first part of the study which we have initiated will primarily look at the safety in the cirrhotic population. A number of drugs have run into toxicities not observed in non-cirrhotic patients.

So, I think the initial focus is to make sure that the drug, and learn from other drugs that have run into toxicities, make sure that in the cirrhotic patient population that we are safe. So, it's a relatively small and quick trial. The second part of your question around multi targeted agents, I think that, review of the current competitive landscape, as far as we are aware of, there aren't any small molecules that are targeting mix in HCC at this point in time.

Why this is important is, as you could have – I don't know if you're privy to the sorafenib presentation at a recent meeting, suggesting that patients who have high HGF, or the patients that don't respond well to sorafenib suggesting that it may have an additional benefit in populations where this pathway is up regulated. So I think we offer a novel mechanism to affect a sub group of HCC that are not affected by some of the targeted therapies that are currently available.

Glenn – Needham & Company

Do you plan to measure – Paolo do you plan to be measuring the HGF levels to get sort of sub-analysis of that sub group?

Paolo Pucci

We plan to do a whole dilutive [ph] biomarkers, which will include HGF and other markers that are felt to be important in HCC. In our Phase I and II development, which we then be able to guide our phase III program.

Glenn – Needham & Company

Well, thank you for the follow-up.

Paolo Pucci

You're welcome.

Operator

Your next question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Joel Sendek – Lazard Capital Markets

Thanks. A financial question first. I understand your conservative stance on the revenue guidance. But, just so I can understand it, so, the revenue that you're projecting is effectively reimbursement for the spend that you will incur, is that correct?

Brian Schwartz

We're not breaking down the revenues, but you could assume that they're related to the three deals that we have running. The two deals with Daiichi Sankyo and the deal with Kyowa Hakko Kirin to some extent. We have assumed not very significant interest income either.

Joel Sendek – Lazard Capital Markets

Okay. And then – as far as the milestones that you might hit, could you tell us anything you can about what those might be as far as –?

Brian Schwartz

The reason we have not included them in the guidance, and we have kept them as upside, Joel, is precisely because on the confidentiality of some of the contracts that we have. There are indeed some milestones that could be related to the development of the program of 197 in Asia Pacific, as it relates to the progresses of Kyowa Hakko Kirin. It’s not automatic for us to place such milestones in a time frame. They are there. We know very well when they could be. We just felt to be more conservative and not include them.

Joel Sendek – Lazard Capital Markets

Okay. And then quickly on the R&D spend; you didn't give specific guidance there. I was just assuming it's generally around the current run rate that you're on right now?

Brian Schwartz

Generally, we have – well, we have in our other filings in the 10-Ks is filed as well, we will – we will probably around the same run rate, and we have – we have only to caution you that we give number net [ph]of the cost sharing, okay.

Joel Sendek – Lazard Capital Markets

Say that again. I'm sorry.

Brian Schwartz

There is some calculation that needs to be done to net the cost sharing that comes from Daiichi Sankyo.

Joel Sendek – Lazard Capital Markets

Okay.

Brian Schwartz

For the R&D and for the 197 program. So there will be a little bit of accounting that we need to walk everybody through as the year develops. But, it'd not affect the guidance that we're giving now for the whole year.

Joel Sendek – Lazard Capital Markets

Okay. And then my last question–

Brian Schwartz

And sorry, one more – and we are not planning personal reduction. We have implemented a few reductions versus what was the target number of people we would have last year. And now we're steady with about 114 people, and we need those people to implement a growing Phase III – Phase II program for 197, plus we have quite a few commitments with Daiichi Sankyo relative to the discovery engine. So we are – we are stabilized for this year.

Joel Sendek – Lazard Capital Markets

And then, can you give us any further – on the data with a combination with sorafenib, can you give us any preview as to what we might see at AACR?

Brian Schwartz

What I can tell you Joel is that we have – we have gone with eyes wide open in the selection of the combination with sorafenib. I can imagine that those of you that know how closely we, Brian and I have been with development of sorafenib, my fear of bias.

We have done in Dr. Chan's labs extensive in vitro work, not only with sorafenib, but with a couple of others TKIs that are important in the market today. And you will probably see some of that at AACR. So you will see the next of our data, which you'll be able to see also something as a proof that data in context, versus other opportunities we could have had. And we have done particularly for next summer, some in vivo work as well, which proved encouraging. So we're undergoing into that combination not at all because we have a positive bias. Of course, I have a bias. I think it's a fantastic drug and it will do well this year and thereafter, but it's a scientific decision.

It's also commercial decision, because maybe I still understand a little bit of the HCC market, and I see a commercial opportunity, which also has been validated through external advice. So we're not just going on my own intuition. We have done quite a bit of work. Let me also add to that if people thought that bringing forward Daiichi Sankyo cooperation would have slowed us down, here you have your answer. Actually, the Daiichi Sankyo has been a stimulus to us to move even faster. And while we were stabilizing our financials assets in our pipeline, bringing our discovery engine at the same level, we were working at HCC as well, but of course the press release that you see today is the results of the work that has been done in the past few months. And as you see, one of the foremost experts in the field of hepatoma today is quoted on our release, and is participating through this initial phase of the program. So I think you want to take the HCC as announcement of today, as living proof that with Daiichi Sankyo, we're moving even faster together than we were moving on our own.

Joel Sendek – Lazard Capital Markets

Okay. Thank you very much.

Brian Schwartz

You're welcome.

Operator

Your next question comes from the line of Bret Holley from Oppenheimer. Please proceed.

Bret Holley – Oppenheimer

Yes, hi. Thanks for taking my questions. I just wanted to clarify something, Paolo; I think you kind of indicated that the costs going into Phase III for 197 were essentially borne by Daiichi Sankyo. Is that for all indications for–?

Paolo Pucci

Yes I think – yes, I have received a number of question one-on-one [ph], and I think this is part of the assessment is – people are digesting the agreement with Daiichi Sankyo, and that we announced and I sense [ph] their finding very positive elements that have been first overlooked. So let me recap how that is going to work. Once 197 reaches Phase III, we will finance still 50% of the external development cost for that program, but we will finance them through milestones and royalties.

So what does it mean as an example? Say that we have a 100 million cost contribution to make to the Phase III program of 197. Say that until then we have received 50 million of milestones related to the Phase (inaudible). So, we will pay those 50 million of milestones, and then we have a balance of 50 million, which will be paid either out of future milestones or out of royalties to come once the product is on the market. Which means essentially that by the time that 197 reaches Phase III, and we are successful with our lead program, we don't have to penalize all the rest that we might be doing at the time to finance a very expensive – relatively expensive 197 program at the time.

Bret Holley – Oppenheimer

Okay. And then the second question I had was related to the potential design of the Phase III and sarcoma. You kind of mentioned a randomized discontinuation. What might be the comparative enrollment [ph] in that trial, I mean, what are some of the ideas there?

Paolo Pucci

I let, Brian, take this question because he took the first.

Brian Schwartz

I think in discussion with experts that these groups of sarcomas are divided into sort of two buckets, one that progresses relatively quickly and another bucket that where progression is slower than the first group. So the concept would be to treat everyone for a reasonable run-in of a number of months and then for those patients with stable disease to then randomize them to either best supportive care versus the ArQule drug to see what the benefit of that stable disease was for the running period to see if there is an incremental effect of the drug. So, for the randomized portion it would be versus [ph] best supportive care.

Bret Holley – Oppenheimer

Okay. Thanks very much.

Operator

Your next question comes from the line of Reni Benjamin from Rodman. Please proceed.

Reni Benjamin – Rodman

Hi, good morning. And thanks for taking the questions. I guess a couple of questions, just to get into details about the ongoing clinical trials. I think in the past you had mentioned at least – let's say starting off with the MiT trial, that enrollment – you had enrolled sort of greater than 40 patients or so. I think that was mentioned in the third quarter. Can you give us an update as to when you think enrollment will complete. I know you mentioned in 2009, but can we get maybe a little bit more specific as to when that could complete. And probably more importantly when we might see, you know, the results from this trial?

Paolo Pucci

I think, definitely within this year, I think what we would like – as it is three – there is two part answers. There're three different histological subtypes in there. We hope to get a read on all three subtypes by the time we complete the trial, but if accrual continues the way that it's currently been going, definitely within this year we should be completed. And the trial will accrue a maximum of 60 patients. So we will – we plan to finish it within the year.

Reni Benjamin – Rodman

Okay. And so – and so would it be safe to say, based on the rate of enrollment, as you see it that we'll also see data by the end of this year as well? Or is that something that could slip into 2010?

Paolo Pucci

I think we may see interim data within the year, and hopefully within the year as well, the composite data as well.

Reni Benjamin – Rodman

Okay. Is there any way to, with the other trials the non-small cell trial, the pancreatic trial, you’re very specific with the HCC. I think you mentioned that you’re going to, complete enrollment and – complete enrollment by the end of this year and even have some data, but, what about within non-small cell lung cancer and pancreatic trials? When can we see enrollment being completed there and the potential for data?

Paolo Pucci

The other trial where we were specific was with the non-small cell lung trial, where we'd – we'll substantially complete recruitment by the end of this year. And obviously that is linked to an inflection point early in – sometimes in the first half of 2010.

And the recruitment for that trial is being going just fine. It's going very fine. And that's why we have made a commitment of substantially completing such recruitment by the end of this year. For pancreas is the PK study, so it's not linked to an inflection point right thereafter, not a very significant inflection point right thereafter.

Reni Benjamin – Rodman

Okay. So from a data point of view, besides the ACR Conference, could we expect anything – it doesn't seem like we'd be expecting anything preliminary at ASCO or any time around the mid-year timeframe, based on the enrollment of these trials.

Paolo Pucci

I think, from our perspective, we have in terms of our Phase I program, our MiT program have submitted abstracts. As you all are aware, we have not received answers, whether those abstracts have been accepted or not, but the hope is that a reasonable portion of the open label program to-date will be presented at ASCO.

Reni Benjamin – Rodman

Okay, okay. That's good. And then, I guess regarding the pipeline, you mentioned EGF or Eg5, the potential to start the Phase I trial and complete that by the end of this year. Can we expect results by the end of this year as well?

Paolo Pucci

Tom will take the question, Tom Chan, our CSO.

Thomas Chan

Yes, good morning. I would expect that we would, again, substantially complete enrollment of our Phase I. As you know, it's typical Phase I is a dose escalation study. So we will start when we hit the maximum tolerated dose and then go into expanded cohort. We expect to at least complete all enrollments by the end of this year, and hopefully substantially have the data that will inform what our Phase II dose would be. So that's all likely can happen sometime during this year depending on when those escalation start.

Reni Benjamin – Rodman

Okay. Is there any sort of update on the Royal Marsden study or is that pretty much done or is there more biomarker analysis ongoing? And have we seen any more – you know, is there any more data to report?

Paolo Pucci

I – in perspective to the Royal Marsden expansion study, has two additional components, which would be part of the ASCO presentation, if accepted. The one component would be, as you're aware we saw reduction in some markers of angiogenesis. So there is an expanded cohort looking at imaging, evaluating the effects of ARQ 197 on blood flow in angiogenesis.

The second part of the trial is related to an expanded group, a small group of just over 10 prostate cancer patients, which are currently be accrued right now. So it's expected, you should see a component of that part of the trial, but the original tissue and biopsy portion has been completed successfully.

Reni Benjamin – Rodman

Okay. And so just – just to recap – with the ASCO, we could probably look forward to some update on MiT and Royal Marsden, right? That should be pretty much be it?

Paolo Pucci

And possibly our combination data are in combination with erlotinib.

Reni Benjamin – Rodman

Oh, great. Okay. And I guess there is one final question, because you keep mentioning the 47 drawdown, what the cash is with the drawdown, and what the cash is without the drawdown? Is there anything special to this drawdown? Does it have to be paid back at some point? Why do we need to look at the cash sort of both ways? Am I missing something here?

Paolo Pucci

No. It's just a calculation. And we're just offering the transparency and doing the calculation for you, rather than let you do it.

Reni Benjamin – Rodman

Okay. But if I'm thinking about this right, you ended the year with over 200 million in cash, and that's the number I should be using, you know when I'm calculating my burn going forward.

Paolo Pucci

To calculate your burn going forward, you have to go to our guidance of this year, which is between 46 million and 49 million of net cash burn for 2009. Okay?

Reni Benjamin – Rodman

Yes.

Paolo Pucci

For the purpose of calculating the cash balance of net cash and marketable securities net of the loan of $47 million, the number is we will end 2009 with 109 million to $113 million. Okay? You cannot add 47 to that. So let me clarify again, we plan to end 2009 with net cash and marketable securities net of the loan and the number is between 109 million and 113 million. We've just done the calculation for you that can give you the gross number and let you subtract the 47.

Reni Benjamin – Rodman

Got it.

Paolo Pucci

Further using that number.

Reni Benjamin – Rodman

Perfect. Great. Thank you very much again.

Paolo Pucci

You’re welcome. We just thought it'd be helpful, given that everybody has so much–

Operator

Your next question comes from the line of Howard Liang from Leerink Swann. Please proceed.

Howard Liang – Leerink Swann

Thanks very much.

Paolo Pucci

Good morning, Howard.

Howard Liang – Leerink Swann

Good morning. Paolo, actually, if I could ask you a couple of big picture of questions, you've mentioned that your cash is – should be sufficient to go through – at the end of 2011. Can I ask you, what clinical and corporate milestones would you like to achieve by – during this period?

Paolo Pucci

So, during – I have given you some visibility until the early part of 2010. So you can imagine that – let's say we are in Q1 of 2010, we're sitting on at the minimum 110 or so million of cash, and we are looking at an inflection point soon thereafter related to the non-small cell Phase II. Not further thereafter – not much thereafter, if the HCC program has proceeded, you might be looking at an inflection point for an eventual Phase II, but I have to call it eventual, because we've just started yesterday with the first patient enrolled in the Phase I running. By that time, we will as Brian has commented, you have heard what you might be seeing for MiT. And most likely we'll be able – also to learn more about the combination that – the combination with the Gemzar, as well as the one with Nexavar.

So you are in Q1, 2010, and in not so – with a very strong cash position still, people will have to buy stocks on the market by then as well. You can imagine, and you have pretty much in the following few months of that year a number of inflection points for 197. You have heard Dr. Chan say that by that time, he should be able to report to us about the outcome of the Phase I for our Eg5 first candidate, ARQ 621. If we achieve this situation in between Q1 and Q2, 2010, I think I'll be satisfied that we're doing a good job for our shareholders and for the patients that are waiting out there.

Now, there is a more qualitative Howard [ph] objective. And it relates to our discovery platform, and it's a very important qualitative objectives because the discovery platform costs are significantly mitigated for a period of time, because of the Daiichi Sankyo deals, but by no means, I don't consider them important in within our cost structure. I consider the two important costs in our cost structure today are the discovery engine and our site and also that is something we will need to address over time, the cost of our site.

The objective – the corporate objective with the discovery platform is really to make it blossom and truly explore the possibility that it could be applied beyond oncology. We are doing many things at one time, and we are people who we are from this conference call, doing all of those things at the same time.

We have not yet focused on that but in the second part of this year; we're going to put much more focus on assessing the capability of our discovery platform beyond oncology. I have to say that few companies are probably putting a little bit more focus than we are on that. There are companies that have strong biologies in other therapeutic areas like inflammation, CNS, metabolic and, our Daiichi Sankyo announcement has caught some of these companies' attention. So we're looking forward to hear what their ideas are on the applicability of our discovery engine beyond oncology.

Howard Liang – Leerink Swann

Okay. Great.

Paolo Pucci

This is to sketch for you, Howard on a qualitative level. I have not yet proceeded to define corporate goals past the mid 2010. I had too many inflection points to go through until then, to generate multiple scenarios beyond that point, but the time will come hopefully.

Howard Liang – Leerink Swann

Okay, great. That was helpful. So, to just maybe some more related question, for – are you doing a four indications. Do you plan to look at more or just initiate more indications and of course four enough for you?

Paolo Pucci

Howard, yes we believe that the scientific foundation of 197 should justify looking at more indications. You remember that we engage a consultancy as soon as I came, consultancy that I trust and with whom I worked in the past intensively, and that we together with that consultancy focused on defining a life cycle management plan for 197. There are more tumors that were prioritized in that plan. We never disclosed it fully, because as we had promised, because the Daiichi Sankyo deal came in between.

Daiichi Sankyo has taken a very good look at that plan, and we thus made the decision to run for HCC. That decision was made almost while we were negotiating, because had it been made after the negotiation, you can imagine that we wouldn’t well be announcing what we've announced yesterday, that we already had the first patient dossier in U.S. But, there are other tumors that have been prioritized, and we're starting them with Daiichi Sankyo and Kyowa Hakko Kirin, and we're looking at a competitive environment. It might be prudent for us to wait until ASCO is done before we announce the fifth tumor type, but I cannot make a clear prediction today.

Howard Liang – Leerink Swann

Okay. And just regarding the HC program, do you have an idea of what Phase II – what the Phase II will look like for HCC? I guess that in the case of Nexavar, you don't see a lot of tumor responses, so will this need to be a randomized study? And also would you do patient selection by doing HGF for example?

Paolo Pucci

Let me say that I think – we see sufficient responses with Nexavar and we see for sure much better than sufficient stable disease and a few of us with Nexavar. And we see all that with Nexavar as a single agent, okay? Obviously, we hope that the combination – with the combination, particularly we hope that we determine actually 197, we will see even more.

We are keeping our options open, Howard. You have by your question read very carefully our press release already, and you see that we have – we are proceeding as a single agent and we are laying the foundation to be able to proceed in combination as well. We think it is prudent given that the field of HCC is changing very significantly from the scientific and the commercial point of view, to keep our options open. That's the best thing we can do right now. Then might come a time that we pursue both evidence as a single agent and in combination, and obviously you can imagine that that there will be in different settings regarding first, second, third line or thereafter.

Howard Liang – Leerink Swann

If I can just ask the last question regarding HCC. Is there any cost sharing with Kyowa, since this will be a disease where they can get fair amount of benefit in your territories?

Paolo Pucci

So, the discussions with Kyowa are ongoing, but the contract that we have with Daiichi Sankyo is completely separate from the contract we have with Kyowa Hakko Kirin. Would it be desirable to have a global program? Yes, it would be desirable. Is HCC important for Asia-Pacific, Japan? Absolutely, it's very important for Europe as well. I think I remember the epidemiology in the Europe, Middle East, Africa and it's very significant. So though no country is as important as a single entity, as Japan is for hepatocellular carcinoma, in terms of commercial potential and medical need. The region Europe and region like the America are quite important as well. The contracts are separate.

So, at this point in time, we're not putting any cost contribution to the known Asia-Pacific Japan program and Kyowa Hakko Kirin will speak for themselves, once and when they announce what their plans are. We speak for ArQule and in some instances we represent the position of the ArQule and Daiichi Sankyo partnership on 197 in the dedicated territories.

Howard Liang – Leerink Swann

Great. Thanks very much.

Paolo Pucci

You're welcome.

Operator

Your next question comes from the line of George Zavoico from Westport Capital Market. Please proceed.

George Zavoico – Westport Capital Markets

Hello, everyone. Thank you for the call and good results. Congratulations.

Paolo Pucci

Thank you.

George Zavoico – Westport Capital Markets

A question about HCC. You mentioned in your press release that there're about 21,000 to 22,000 cases in the U.S. And Paolo, you mentioned that you see this as a commercial opportunity, and at the same time, you're talking about preselecting patients based on HGF and perhaps other biomarkers. Based on your calculation, how big of a market do you actually expect it to be?

Paolo Pucci

So, I'll let Brian comment about the preselection, because probably there's something to clarify. I'll answer your second question. We have – we have developed several scenarios, George. I think we have at least four scenarios that we have developed. And as I told to Howard, we're keeping our options open. So I will be able to comment more on commercial potential once we decide the task forward.

Obviously, it's a very specific fast forward. We'll have available in our epidemiology, if it is broader fast forward, we'll have a broader epidemiology. That's as much as I can say to date. The scenarios aren't there, so we've gone into this opportunity with our eyes wide open. But, I'd like to let Brian clarify about patient pre-selection, because there's something that needs clarification.

Brian Schwartz

George, I think it's broken I think in two parts. I think the initial development will be in an unmet medical need setting, which is basically sorafenib, failures of sorafenib with [ph] intolerable patients. However, as the data emerges on potential biomarkers, not with sorafenib patients respond, but with sorafenib patients don’t respond, it opens up another front-line setting, where you could potentially go very quickly. So I think it's an exploratory Phase I, II opportunity that we would like to explore to see where it'll actually take us, but it opens up a single agent opportunity front line if the biomarkers pan out.

George Zavoico – Westport Capital Markets

Terrific. So you have four scenarios, and depending on how the data turns out, you might have larger market or smaller market, and hopefully it will be the larger one.

Paolo Pucci

Correct.

George Zavoico – Westport Capital Markets

Next question regarding the cost containment measures that you've discussed, have these already been implemented or do you see more cost containment measures coming?

Paolo Pucci

We have implemented that we could implement. And I can only tell you what I said during the opening of the call that we continue to re-assess everything, not in this given program data.

George Zavoico – Westport Capital Markets

Okay. And regarding the Daiichi and Kyowa partnerships, just a question about the logistics in this, do you have independent meetings with each partner? Do you ever get into a room, all three of you together to talk about strategy and development?

Paolo Pucci

For now George, we have independent meetings with both parties, and we are a guest in – for updates in some of the Kyowa Hakko Kirin meeting, because they have complete control over the planning of their business. Obviously, and we've had already two joint steering committees with the Daiichi Sankyo and a full alliance set up has been in place as of 15 days after the signature.

As a matter of fact, our second meeting with Daiichi Sankyo was here two days ago. Obviously, we've adhocs meetings, tri-party and it is likely to – that the tri-party relationship we grow, the better combination between all three parties, the better for everybody. But those are not formalized – to the point of being formalized yet.

George Zavoico – Westport Capital Markets

I see, okay, and one final question.

Paolo Pucci

Both alliances are going very well.

George Zavoico – Westport Capital Markets

And one final question, regarding the payment for the Phase III. You said it's going to be by future milestones and future royalties?

Paolo Pucci

Yes.

George Zavoico – Westport Capital Markets

Now, in the worst case scenario, if the program doesn't work out the way everybody is hoping it'll work out, do those payments constitute a loan that has to be then paid back or is it forgivable?

Paolo Pucci

So, Peter negotiated much of the contract, and we're probably going into language and their relevance from the legal point of view, and giving that is also the general counsel here, I'll let him take the answer to your question, if you don't mind, George?

George Zavoico – Westport Capital Markets

Sure.

Paolo Pucci

George, it's pretty straightforward. If the program should fail, we do not owe that money back. It is not a loan.

George Zavoico – Westport Capital Markets

Okay, great. Thank you very much and good luck moving forward.

Paolo Pucci

Thank you, George.

Operator

At this time, there are no further questions in queue. I would now like to turn the call over to Paolo Pucci for closing remarks.

Paolo Pucci

So we had a very well attended call today. Most people that have followed us for quite sometime and with whom we've met in person frequently over the past few months and some new people, so let me welcome the new people that join us on the call, as well as those with whom we regularly are in contact.

We hope that this call was informative for you and that give you the clear perception that our business is moving forward and that our financial position is sound. We're looking-forward to working with all of you in the near future, and we wish you all a good remainder of the week. Bye-bye.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.